SEC Awards $14 Million to Whistleblower

The SEC said it has awarded more than $14 million to a whistleblower whose information led to an SEC enforcement action that recovered substantial investor funds.

The award is the largest made by the SEC’s whistleblower program to date, the agency said Oct. 1.

The whistleblower, who does not wish to be identified, provided original information and assistance that allowed the SEC to investigate an enforcement matter more quickly than otherwise would have been possible, the SEC said.

Less than six months after receiving the whistleblower’s tip, the SEC said it was able to bring an enforcement action against the perpetrators and secure investor funds.

The SEC said the first payment to the whistleblower was made in August 2012 and totaled approximately $50,000.

“While it is certainly gratifying to make this significant award payout, the even better news for investors is that whistleblowers are coming forward to assist us in stopping potential fraud in its tracks so that no future investors are harmed,” said Sean McKessy, chief of the SEC’s Office of the Whistleblower.

By law, the SEC must protect the confidentiality of whistleblowers and cannot disclose any information that might directly or indirectly reveal a whistleblower’s identity, according to the agency.

In a separate case, the SEC said in August and September 2013, more than $25,000 was awarded to three whistleblowers who helped the SEC and the U.S. Department of Justice halt a sham hedge fund. Once all sanctions are collected, the ultimate total payout in that case is likely to exceed $125,000, the SEC said.

The SEC’s Office of the Whistleblower was established in 2011 as authorized by the Dodd-Frank Act, according to the agency. The SEC said the whistleblower program rewards high-quality original information that results in an SEC enforcement action with sanctions exceeding $1 million, and awards can range from 10% to 30% of the money collected in a case.

In 2012, the whistleblower program brought in more than 3,000 tips from all 50 states and 49 other countries, the SEC reported. The most common complaints were related to corporate disclosures and financials, offering fraud and manipulation.